DOL Issues Final Rule to Clarify Employee or Independent Contractor Status

The Department of Labor (DOL) Wage and Hour Division has issued a news release and final rule to clarify whether a worker qualifies as an employee or an independent contractor under the Fair Labor Standards Act. This determination is critical in determining whether a worker can participate in (or sponsor) a retirement plan.

According to the news release, the new “independent contractor” rule restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor. The rule addresses six factors that guide the analysis of a worker’s relationship with an employer.

• The opportunity for profit or loss a worker might have.
• The financial stake and nature of any resources a worker has invested in the work.
• The degree of permanence of the work relationship.
• The degree of control an employer has over the person’s work.
• Whether the work the person does is essential to the employer’s business.
• Consideration of the worker’s skill and initiative.

The final rule is effective 60 days after publication in the Federal Register.